The dollar was little changed Wednesday, recovering from earlier declines, as traders weighed the potential fallout from a U.S. government shutdown.
The dollar index, which gauges the greenback’s performance against six rival currencies including the euro and the Japanese yen, was last up just 0.02% at 97.79. Earlier in the day, it fell more than 0.2%, putting it on pace for its worst annual decline in 22 years.
The U.S. government shut down after the Senate short-term funding bill failed to pass, and Democrats led by Senate minority leader Sen. Chuck Schumer and House minority leader Rep. Hakeem Jeffries push for a measure to extend enhanced Obamacare tax credits. President Donald Trump, meanwhile, threatened benefit cuts for “large numbers of people” if an agreement wasn’t reached.
“Historically, shutdowns have corresponded with a weaker USD, though primarily against safe haven currencies” such as the yen, Swiss franc and euro, wrote FX analyst Daniel Tobon of Citigroup. “Given persistent [U.S. dollar] pessimism in the current market narrative, further increased U.S. political uncertainty should also pressure the USD lower. However, a quick resolution to the shutdown could lead to limited follow-through, keeping us in similar ranges to recent months.”
